March 19 (Bloomberg) -- Japan Steel Works Ltd., a nuclear
parts supplier for customers from Areva SA to Hitachi Ltd., is
considering tieups in Southeast Asia and India after the
Fukushima disaster squeezed demand at home and in the U.S.

The company will have a tough time generating orders in the
next two years, President Ikuo Sato said in an interview in
Tokyo. Forging ventures to make valves, tubes and other smaller
parts involved in nuclear reactor construction will help open
export markets for key products, he said.

“If we’re able to form such partnerships, it will be
easier to enter such markets,” Sato said. “It will be
necessary for us to tie with companies” that are seeking to
improve their access to technology.

Emerging markets offer an opportunity for growth amid
growing opposition to nuclear power in Japan and elsewhere after
the Fukushima tsunami and earthquake prompted the shutdown of
almost all Japan’s atomic stations.

Japan Steel operates the only plant in the world capable of
producing the central part of a nuclear reactor’s containment
vessel in a single piece, reducing the risk of a radiation leak.
The company said on Nov. 16 that orders for forged steel used in
nuclear and thermal power plants would probably total 30 billion
yen ($312 million) in the year ending March 31, 43 percent lower
than levels two years ago.

“Given that it will be difficult for the company to expect
demand in Japan, the key is to what extent they will be able to
secure overseas projects, especially in China,” said Ryo
Tazaki, an analyst at Nomura Securities Co. in Tokyo.

Product Shift

Japan Steel Works rose 0.8 percent to 509 yen in Tokyo,
paring declines this year to 8.8 percent. The Nikkei 225 Stock
Average gained 2 percent.

The company is relying more on the segment of its business
that makes industrial machinery as global demand for atomic
energy declines.

Japan Steel Works expects operating profit from the
division that makes steel and energy products to drop about 97
percent to 800 million yen in the year ending March 31, from 25
billion yen two years earlier, according to a Nov. 16
presentation by the company. Operating income in the machinery
segment is set to surge almost fivefold to 15.4 billion yen over
the two-year period, aided by demand from carmakers.

To avoid an outflow of technology, Japan Steel Works has no
plan to build plants outside Japan capable of making the high-quality steel used in nuclear containment vessels, Sato said in
the March 13 interview.

Cuts in Idled Capacity

Sato worked as the head of the company’s Muroran plant on
the northern island of Hokkaido for five years before taking
over as president in June 2009. The accident at the Dai-Ichi
nuclear power plant occurred just as Japan Steel Works completed
an 80 billion yen expansion at Muroran in response to demand
from nuclear reactor builders.

Japan Steel Works has removed aged facilities and relocated
some of its workers at the Muroran plant since Fukushima,
according to Sato. The plant is operating at about 60 percent of
forged steel capacity even after cutting 30 percent to 10,000
metric tons per month.

Hitachi, Japan’s second-biggest manufacturer, in October
agreed to buy Horizon Nuclear Power from Germany’s two largest
utilities for 696 million pounds ($1.1 billion), ensuring
support for the U.K. government’s energy program.

The shale-gas revolution in the U.S. has led to a shift
away from nuclear energy and fossil fuels in favor of lower-cost
gas, delaying a recovery in demand, Sato said.

Germany has decided to close all its reactors. In Japan,
two of the country’s 50 nuclear reactors are currently in
operation. Prime Minister Shinzo Abe told lawmakers in late
February that Japan will begin restarting its idled nuclear
plants only once new safety guidelines are in place.